Reading Corporation Is Considering an Investment Opportunity with the Following

question 70

Essay

Reading Corporation is considering an investment opportunity with the following expected net cash inflows: Year 1,$250,000; Year 2,$350,000; Year 3,$395,000.At the end of Year 3,the residual value of the investment would be $50,000.The company uses a discount rate of 12%,and the initial investment is $400,000.Calculate the NPV of the investment.
Present value of $1:
$$\begin{array} { | c | c | c | c | c | } \hline & 11 \% & 12 \% & 13 \% & 14 \% \\\hline 1 & 0.901 & 0.893 & 0.885 & 0.877 \\\hline 2 & 0.812 & 0.797 & 0.783 & 0.769 \\\hline 3 & 0.731 & 0.712 & 0.693 & 0.675 \\\hline 4 & 0.659 & 0.636 & 0.613 & 0.592 \\\hline 5 & 0.593 & 0.567 & 0.543 & 0.519 \\\hline\end{array}$$

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Definitions:

Momentary

Describes a brief, transient action, especially in the context of switches or signals, where the effect lasts only as long as the actuating force is applied.

Holding Contacts

Contacts within a relay or starter that maintain the circuit's state even after the actuating force is removed.

Memory

A component or system in computing for storing data and instructions temporarily or permanently, necessary for executing programs.